How To Buy Stocks + 9 Tips From the Pros

Introduction

• Buying stocks can be intimidating.
• Learn key tips and practices for purchasing stocks.
• Understand what stocks are and how they work before investing.

Stock Exchanges

• Major U.S. Exchanges:
  • American Stock Exchange (AMEX)
  • National Association of Securities Dealers Automated Quotations (NASDAQ)
  • New York Stock Exchange (NYSE) on Wall Street, New York City
• Liquidity:
  • More shares trading = higher liquidity.
  • Low liquidity increases risk.

Steps to Start Buying Stocks

1. Eliminate Consumer Debt

   • Pay off high-interest debt (e.g., credit cards).
   • Average stock market return (10%) is less than credit card interest (18-22%).

2. Research Online Brokers

   • Compare different brokers and their pricing.
   • Utilize review sites for broker comparisons.

3. Explore the Brokerage Site

   • Get familiar with the platform and its functions.
   • Understand fees and how to execute trades.

4. Deposit Funds

   • Transfer money to your brokerage account.
   • Be aware of minimum deposit requirements.

5. Understand Order Types

   • Market orders, limit buy/sell, stop buy/sell.

6. Place Your Trade

   • Regular trading hours: Mon-Fri, 9:30 a.m. - 4 p.m. ET.
   • Monitor the price at which trades are filled.

7. Monitor Your Stock

   • Avoid daily tracking to prevent emotional trading.
   • Focus on investing, not frequent trading.

9 Tips to Buy Stocks Like a Pro

1. Have a Well-Thought-Out Investment Strategy

   • Consider value investing, growth investing, or fundamental analysis.

2. Assume the Right Amount of Risk

   • Higher market cap usually means lower risk.

3. Be Patient

   • Stocks have valuable long-term returns.

4. Accept Uncertainty

   • Investing involves risks and no guarantees.

5. Past Performance Isn’t a Predictor

   • Historical data doesn't forecast future results.

6. Diversification

   • Diversify by geography, industry, asset class.

7. Keep Learning

   • Continuously learn about the stock market and investing.

8. Be a Contrarian When Necessary

   • Sometimes the masses are wrong; go against the trend if warranted.

9. Don’t Boast About Gains

   • Avoid bragging about successful investments while hiding losses.

Top Stock Newsletters (as of January 3, 2025)

• Rankings based on stock picks' performance compared to the S&P500.
• Top performer: Alpha Picks (71.7% average return, 47.8% excess return).
• Other notable newsletters include Zacks' Value Investor, Moby.co, and Motley Fool's services.
• Performance based on "excess return" (return above S&P500).